By Associate Attorney Danielle Nodar
Financial Planning Month is observed in October, and it is a great time to reassess your finances, budgets, and plan for achieving financial goals before the holiday season and beginning of a new year. When creating an estate plan for clients, we look beyond planning for death or incapacity through estate planning documents and discuss a client’s current financial plan and strategy. As we are not financial planners or advisors, we often advise our estate planning clients to work closely with financial professionals so that their estate plan works with their financial plan and goals.
One of the advantages of working with a financial professional is they can help you find the right balance that works for you so that you can save for the future, pay off debts, and provide for your loved ones if you pass away. The plan that you create with your financial planner oftentimes works in conjunction with your estate plan. For example, a financial planner can assist you with planning and saving for retirement. This works to assist you with goals for your lifetime, but also with your estate plan because you can designate a beneficiary (either an individual person or an entity like a trust or charity) to receive any remaining retirement funds when you die. The beneficiary of your choosing will receive the remaining retirement funds, even if your will says otherwise, as funds distributed using a beneficiary designation pass to a beneficiary outside of probate. Furthermore, there are different distribution timelines and tax consequences depending on whether you name a spouse, minor child, disabled person, or charity as a beneficiary.
Another important factor of financial planning is exploring life insurance. Just like retirement, life insurance is distributed directly to the beneficiary you name and does not pass through the probate estate. However, life insurance does not have the same restrictions on use of funds as retirement can (unless a trust is the beneficiary), is oftentimes passed to loved ones tax free, and is usually distributed more quickly. This can result in a tremendous burden being lifted as your loved one will receive money for expenses like funeral expenses, medical bills, or even a mortgage payment while they are grieving. It can also ease the burden of paying back your debts. If you pass away with debt, some of your assets may be included in your probate estate to pay those final debts, which can result in your loved ones not inheriting anything if your estate is insolvent. Life insurance will get to the beneficiary regardless of probate assets.
It is important to discuss the strategies and tools for creating a financial plan that alleviates stress for you and your loved ones while building wealth for your future. If you would like a referral for a financial planner, please reach out to Jesson & Rains. We feel strongly about the peace of mind these professionals can provide and believe it is an important part of the estate planning process.
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